Any economy that rewards debt and punishes savings is doomed. We will never turn around this credit spiral of problems until our governments realise that goods must be mostly bought with real money. The Western world has been conned into thinking it was asset rich due to falling prices of Chinese made consumer goods. Believing you're asset rich is one thing, but getting someone to pay high prices for assets is another.
It's no secret that we are witnessing our leaders do everything they can to keep property prices inflated. In doing so people will continue to believe they're wealthy so they borrow and spend more. With house prices remaining high high stamp duty fees can continue to flow in.
But I've said it before, house prices are very slow to react and change, much like the QE2. Where as the share market can react even before news or data is realised.
If you understand anything about the psychology of buyers and sellers then you'll understand what it will take to shift long terms beliefs. There are people still out there who think house prices will continue to climb - they're the ones who are still buying.
We are only at the beginning of a sustained long term reduction of house prices. Why? Because of the leveraged debt out there. Once the sharemarket becomes back in vogue again many house investors will dump their houses for better returns on the ASX, etc.
The sharemarket was the first to dump, the housing market was the last to dump. The sharemarket will recover well before there's any bright light on the daily news on the economy. Housing will continue to lag as it will then be viewed as toxic.
